2023 (7) TMI 787 - AT - Income Tax

Invalid reassessment notice under section 148 leads to appeal success for Assessee

The Tribunal allowed the Assessee's appeal, setting aside the reassessment proceedings due to the invalidity of the notice under section 148, issued ... Reopening of assessment u/s 147 - recording of satisfaction by the competent authority before the issuance of notice u/s 148 - what's the date of the grant of such approval by the ld PCIT? - HELD THAT:- Range head has recommended and granted the approval physically under his signatures on 26.03.2018 and thereafter, online on 28.03.2019 and unless the Range head recommends the matter, the matter cannot proceed further and therefore, the later approval granted by the Range head on 28.03.2019 is taken as the correct date of recommendation. Similarly, the ld. PCIT who is the approving authority in the instant case has granted the approval online on 28.03.2018 and thereafter, physically under his signatures on 29.03.2019 and therefore, the latter approval granted by him is taken as the correct and final date of grant of approval which is 29.03.2019 by the Competent authority for issuance of notice u/s 148 by the AO. Thus where the notice u/s 148 has been issued well before the date of grant of approval by the ld PCIT on 29.03.2019, the same is clearly a jurisdictional defect u/s 151 which cannot be cured as it goes to the foundation of the whole of the assessment proceedings u/s 147 and therefore, the consequent assessment proceedings deserve to be set-aside on this ground itself. Decided in favour of assessee. Issues Involved:1. Validity of notice under section 148 without proper approval.2. Jurisdiction of the Assessing Officer (AO) under section 147.3. Non-compliance with the law of natural justice in reassessment proceedings.4. Validity of reassessment based on reasons recorded or show cause notice.Summary:Issue 1: Validity of notice under section 148 without proper approval:The Assessee contended that the notice under section 148 was invalid as it was issued before obtaining approval from the Principal Commissioner of Income Tax (Pr. CIT). The notice was dated 28/03/2018, while the approval was dated 29/03/2018. The Revenue argued that the approval was granted online on 28/03/2018, and the notice was issued on the same date. The Tribunal found a discrepancy between the online and physical approval dates. The physical approval was dated 29/03/2018, which was after the notice issuance date. This was deemed a jurisdictional defect under section 151, rendering the notice void ab initio and the assessment proceedings invalid.Issue 2: Jurisdiction of the Assessing Officer (AO) under section 147:The Assessee argued that the notice under section 148 was issued by ITO W-6(5) Ludhiana, but the assessment was completed by ITO W-4(3) Ludhiana, which is not permissible. The Revenue countered that the notice and assessment were both handled by ITO W-4(3) Ludhiana. The Tribunal found no merit in the Assessee's argument as the correct jurisdictional authority was not disputed during the assessment proceedings.Issue 3: Non-compliance with the law of natural justice in reassessment proceedings:The Assessee claimed that reassessment was conducted without providing the statement of a third party or allowing cross-examination, violating natural justice. The Revenue argued that the reopening was based on a report from the Investigation Wing and that the Assessee was aware of the transaction details. The Tribunal did not delve into this issue in detail as the primary ground of invalid notice was sufficient to decide the appeal.Issue 4: Validity of reassessment based on reasons recorded or show cause notice:The Assessee argued that the reassessment was invalid as it was not based on the reasons recorded or the show cause notice. The Tribunal did not address this issue separately, as the invalidity of the notice under section 148 was sufficient to set aside the entire reassessment proceedings.Conclusion:The Tribunal allowed the Assessee's appeal, setting aside the reassessment proceedings due to the invalidity of the notice under section 148, which was issued without proper approval. Other contentions raised by the Assessee were dismissed as academic and infructuous. The appeal was pronounced in the open court on 12.06.2023.